Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Jabil Circuit, Inc. (JBL - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Jabil Circuit has a trailing twelve months PE ratio of 15.4, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at 20.7. If we focus on the long-term PE trend, Jabil Circuit’s current PE level puts it above its midpoint over the past five years.
Delving deeper into the PE's inputs, we observed that the company’s PE multiple has fallen sharply in early 2015. This was driven by an increase in earnings, without a corresponding increase in price. These trends indicate that the stock might be trading at a good entry point.
Further, the stock’s PE also compares favorably with the Zacks Computer & Technology sector’s trailing twelve months PE ratio, which stands at 22.6. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Jabil Circuit has a forward PE ratio (price relative to this year’s earnings) of 11.2, so it is fair to say that a slightly more value-oriented path may be ahead for Jabil Circuit stock in the near term too.
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Jabil Circuit has a P/S ratio of about 0.3. This is significantly lower than the S&P 500 average, which comes in at 3.3 right now. However, as we can see in the chart below, this is around the highs for this stock in particular over the past few years.
If anything, Jabil Circuit is towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Jabil Circuit currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Jabil Circuit a solid choice for value investors.
For example, its P/CF ratio comes in at 4.7, which is far better than the industry average of 9.8. Clearly, JBL is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Jabil Circuit might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of D. This gives JBL a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the Zacks Consensus Estimate for the earnings for the current quarter and fiscal year remained stable, over the past sixty days. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Jabil Circuit, Inc. Price and Consensus
Notably, the stock has a Zacks Rank #1 (Strong Buy) indicating robust fundamentals and expectations of outperformance in the near term.
Jabil Circuit is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a good industry rank (among the Top 45%) and strong Zacks Rank, Jabil Circuit looks like a strong value contender. In fact, over the past one year, its industry has clearly outperformed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
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